MTD TV opened its Asia Value-Add Forum 2021 on Tuesday with a spotlight Interview featuring Link Asset Management CEO George Hongchoy, who shared insights gained from running Asia’s largest real estate investment trust.
The one-on-one discussion with Mingtiandi founder Michael Cole revealed how the manager of Link REIT has continued to expand Greater China’s largest retail portfolio through the pandemic, and also how a growing focus on sustainability has helped to boost returns on its more than HK$199 billion ($25.6 billion) portfolio.
Fresh off last month’s deal in which Link agreed to acquire a half-stake in Shanghai Qibao Vanke Plaza shopping mall — the REIT’s fifth mainland retail investment — Hongchoy credited China’s rapid and decisive response to the COVID-19 outbreak with keeping asset values steady in the country.
“I think there was some initial panic, but retail sales really bounced back quickly, the lockdown restrictions were eased very quickly,” he told MTD TV. “Obviously there is still a lot of caution about how to be sure that the cases will not rebound, but China has provided a very stable environment for us.”
Sustainability is shaping up to be a key investment metric this decade, and Link can point to big strides it has made in establishing a greener footprint for its Hong Kong portfolio.
“It has been a long journey,” Hongchoy said. “For over 10 years we’ve been looking at sustainability in terms of carbon reduction. Compared to the baseline of 2010, up until the end of 2020, we have already reduced our energy consumption in Hong Kong by 40 percent. That’s no mean feat.”
For several years the REIT has adopted integrated reporting, in which progress on sustainability is incorporated into the annual report as a core gauge of the organisation’s health. Link also took the lead in issuing some of Asia’s first green bonds tied to eco-friendly improvements.
“The mix of investors has certainly changed and gets greener as the years go by,” Hongchoy said. “There’s a lot more support in Hong Kong.”
When asked whether Greater China is poised for a sharp rebound as COVID vaccinations get into more arms and the pandemic fades further into the background, Link’s CEO couldn’t resist veering from the company line.
“My corporate affairs colleague wrote down ‘cautiously optimistic’. I’ve never liked those two words,” Hongchoy joked. “I’m not an optimist; I’m a realist. I look at what’s going on and try to manage it. And I think there are a lot of reasons not to be too optimistic for 2021.”
The trust’s revenue declined 1.9 percent to HK$5.2 billion ($674 million) during the period from 1 April through 30 September last year as the pandemic pushed net property income down 0.8 percent to HK$4.0 billion. Link REIT is due to complete its financial year on 31 March.
You can watch the full interview with George Hongchoy above.
China Panel Up Next
Mingtiandi’s deep dive into value-add opportunities will continue on Wednesday 7 April with a group discussion of how “buy, fix and sell” works in mainland China, where the challenges of site acquisition in core cities such as Shanghai and Beijing have been creating openings for investors able to acquire and reposition ageing assets in key locations.
Joining us for next week’s discussion will be Gaw Capital managing director Johnny Shao, who leads the fund manager’s China operations from Shanghai; Don Tan, managing director for fund management with Kailong; Francis Li, head of capital markets for Greater China at Cushman & Wakefield, and Megan Hu, managing director of mainland private equity real estate firm WorldUnion Investment.
The value-add forum will wrap up on 12 April with a panel focusing on Asia’s core cities outside mainland China, including case studies from projects in Hong Kong, Singapore, Seoul and more.
The core cities panel features contributions from Stephen Tang, head of value-add and opportunistic real estate for Asia Pacific at ARA Asset Management; Andrew MacPherson, head of asset development for Asia Pacific at JLL; Gordon Marsden, regional director for APAC capital markets at Cushman & Wakefield; and Jason Lee, chief investment officer for APAC at AEW.